It is possible that other countries and emerging markets might or maybe too big to fail banks with free Fed money, but this scenario suggests some sort of long-term decline at some point under even the best of circumstances.

gg is hoping that emerging markets will be over their contraction in 5-7 years and be able to pick up the selling slack when a large population of aging Americans are selling for cash. Otherwise it could get ugly.

Same thing is/will happen in housing. Seniors need the cash equity out of their home and there are limited buyers. gg has thought for a long time that this pressure, with the increased debt burden/low-income on young people will contribute to the long-term decline in real estate in the US and other first world economies.

This is a long-term pressure on a long term cycle tied to generational demographics.

June 10, 2014

Groovygirl is getting more and more concerned with the “disappearing” metals in China’s commodity warehouses. This will, of course, effect China and the national links of collateral, first. But, this is a global market. It is all connected.

The dark pools, unregulated trading, and questionable legal accounting practices, globally, make the end result unpredictable. gg can make one prediction: the Big Banks will get their money first….

gg remembers that it took about 12-18 months from the first rumors of trouble to the full blow up of MF Global. Looking back you could see the signs of MF Global well before JP Morgan called its loan. Twelve to eighteen months is usually how long it takes for these things to trigger and then impact other markets. But since investors are now aware of the MF Global-like possibilities, a race to the exits could occur at any time.

This story is not about fake gold, missing gold/copper, or really commodities at all. It is about the loans, debt, and credit that have been created and now are backed by nothing that is about to collapse and move into other markets/countries.

groovygirl is watching this story closely. Have you personally visited your physical gold and silver lately? By the time this goes down, it will be too late to get your money out or get physical delivery, just like MF Global. Prepare, if you have not already.

June 6, 2014

Peak Prosperity had a great post this week on the US housing market. Click here.

Groovygirl is posting this link for the same reason that Brian did: housing is in a long term decline. What happened in 2007-2008, will happen again. Do not get caught upside down in your primary residence. Brian from Chris Martenson’s website highlights a few of the reasons and backs them up with charts.

Remember what happened when people were upside down in their house last time? They just walked away or lived there without paying anything. Mortgage Securities had assets on their books, but no interest income. Mortgage Banks had tons of empty houses that were costing them money, not bringing money in. Because of the large amount of foreclosures, banks couldn’t sell all their assets at once, it would have tanked the market (not just caused a decline). So houses stood empty.

We have the certainty of this happening again, but this time hedge funds own a lot more houses than they did in 2007. Whether the government chooses to “bail out” the owner or not, the debt must be taken down. The steepness of the decline will be determined by the government’s policy reaction. The US housing market for the last 60 years has been built and sustained on higher debt, higher prices, and debt availability. Investment in housing is sustained by income exceeding expenses/loan payments and then selling higher for a profit. These are the long time models that are breaking down. 2007 was just the first leg. That doesn’t mean you shouldn’t buy. It means the investment plan and exit strategy are different.

The most dangerous words ever spoken are: “This is how it has always been done.” And in this paradigm shift of everything and on a global scale, that mindset is extremely dangerous. Beware of anyone saying that to you, especially someone who is handling your money. They must explain to you why “doing it this way” will work if the economy/trend goes up, down, or sideways for the length of the investment.

But some other reasons not mentioned for the housing decline are:

lower income/higher expenses equals less qualified mortgage apps

banks demand higher down payments, which require time to save additional money

investors, foreign and domestic (i.e hedge funds and REITs), are driving up prices with cash deals. This will not last.

groovygirl says: not all housing markets will drop severely, like Detroit. The national average is just that: a national average. That is why you must know and watch the local real estate market of your residence/investment. How much are houses selling for in your area and to whom? Are they all cash sales? How many are first time buyers? What is the average age? How many rentals are in your area? Is your local school district improving or declining? Are good jobs coming or leaving your area? And do not ask a real estate agent. They are salesmen, not investors.

For instance, in my area(s) in the last six months, real estate agents are listing houses for 15-30% more than what they actually end up being sold for. (List vs. sold price for houses going thru an RE agent.) And this is in a market with low inventory. They are assuming low inventory will drive prices higher. That is not happening. So just looking at list prices on your block may not give you the complete picture. And if you are buying, this is good info, so that you do not overpay for an investment.

There are more and more for sale by owner, short sales, auctions, and private sales before anything gets to real estate agent systems. Agent data is not necessarily the complete current market. Watch your local trends completely and closely.

The two Daily Bearish Reversals are 1240 and 1186. We are holding the 1240 level for now with a minor Daily Bullish forming at 1262 and 1294. We see a turning point next week and the week of the 23rd. We do not see the meltdown yet without a monthly closing below 1190 area. We also see tomorrow as a turning point in both silver and gold.

Martin also has a silver chart and comments.

Martin Armstrong has a new mailing/office address:

Armstrong & Princeton Economics

Brandywine Plaza West
1521 Concord Pike
Suite 301
Wilmington DE 19803

ArmstrongEconomics@GMail.COM
Phone #:1-302-448-8080

groovygirl says:

As you may know, gg buys a certain about of physical gold and silver each year to hold long-term. She doesn’t trade metals anymore. She tries to pick the lowest point about every quarter to buy. I am buying a little of both this week. But I am waiting to see if we have a further drop in the next 2 weeks to buy a little more. This is what groovygirl is doing for her own personal financial goals. You are responsible for your own investing/financial decisions. Sorry gg has been absent, very busy! Hopefully things will slow down in the next few weeks and she can get back to regular posts. Thanks again for reading.